While the growth of closed-end funds (CEFs) is slowing, banks and insurers seem to perceive CEFs as attractive investments in the current low-interest rate environment.

According to Fitch Ratings, banks and insurance companies have increased financing to municipal and taxable CEFs to $46.9 billion, which is up from $14.9 billion in 2007. The funds were used primarily to refinance funds' auction-rate preferred shares (ARPS) and increase leverage in taxable funds starting in 2009.

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